Smuggled textiles losing the edge

Mustaqim Adamrah, The Jakarta Post, Jakarta | Fri, 12/12/2008 10:44 AM  

Waning competitiveness of overseas textiles and garments have discouraged local traders from smuggling these products, gradually capping the circulation of these illicit goods to an estimated 13 percent of the market this year down from an estimated 22 percent last year. 

Indotextiles research center executive director, Redma Gita Wirawasta, attributed this "significant" drop to the weakening competitiveness of imported textiles, particularly from China -- the largest source of these smuggled products. 

"Illegally imported textiles and garments are more expensive now than locally made, thus becoming less competitive in the domestic market," he said Thursday. 

Around 80 percent of smuggled textiles came from China, while the remaining 15 percent were from India and Bangladesh and 5 percent was from small countries in Europe, according to Redma.

 

 Smuggled goods can be sold cheaper as they evade payment of import duties and taxes.

 

Redma said the total domestic textiles and garments market was estimated to consume a total of 1.24 million tons valued at $5.36 billion this year. Last year, local consumption reached 1.22 million tons worth more than $4.5 billion. 

Redma believed 13 percent of domestic textile and garment sales this year were those of smuggled products, equivalent to 160,940 tons valued at US$697 million, while 76 percent was locally produced equivalent to 940,880 tons valued at $4.07 billion. 

Another 11 percent represented legally imported textiles and garments amounting to 138,180 tons worth $593 million. 

Analysts believe Chinese exports, including textiles and garments, are becoming more expensive in the global market following Chinese government decisions to impose higher environmental standards on manufacturers. 

Rising labor and energy costs since early this year, coupled with the strengthening of the Chinese yuan against the U.S. dollar, have also contributed to the higher cost of Chinese goods. 

Redma said aside from the low competitiveness of smuggled textiles, the government's commitment to domestic market protection has also been very helpful, resulting in a huge psychological impact against illegal traders. 

In October, the Trade Ministry issued a regulation on imports of particular products, stipulating that only five ports and certain international airports could serve as ports of entry for imported goods in five special categories namely; electronics, garments, toys, footwear, food and beverages. 

The ports include Belawan in North Sumatra, Tanjung Priok in Jakarta, Tanjung Emas in Central Java's Semarang, Tanjung Perak in East Java's Surabaya and Soekarno-Hatta in South Sulawesi's Makassar. 

Goods under these five categories entering through other ports are declared illegal. 

The Indonesian Industry Ministry's textile industry director, Arryanto Sagala, said the government was setting up strategies to make the local textile industry more efficient and competitive for the domestic market. 

This year, Indotextiles has estimated that sales of local textiles should grow by 7.68 percent to $16.25 billion from $15.09 billion booked in 2007. 

Of the 2008 amount, 33 percent will be for the domestic market and 67 percent for exports to the United States (26 percent), the European Union (12 percent), Japan (3 percent), ASEAN (5 percent) and others (21 percent), according to data from Indotextiles.

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